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Petronet goes shopping for LNG

Petronet goes shopping for LNG
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First Published: Thu, Feb 15 2007. 10 24 PM IST
Updated: Thu, Feb 15 2007. 10 24 PM IST
Singapore: Petronet LNG Ltd, India’s biggest liquefied natural gas (LNG) importer, sent managing director Prosad Dasgupta on a tour of Africa and West Asia to increase LNG purchases by 40% amid a shortage caused by soaring demand.
The company plans to buy as much as 2.25million tonnes (mt) of LNG, equal to about 40 individual cargoes, for delivery in the year starting April 2007 to supply the country’s largest gas-fired power plant at Dabhol, Dasgupta said on 9 February, before leaving for Algeria, Oman, Qatar and Abu Dhabi on an “LNG-buying spree”.
The extra gas will make state-controlled Petronet the world’s largest buyer of spot cargoes, boosting profit. The company, whose shares have tripled since listing in March 2004, is tapping demand at gas-fired power stations as utilities expand capacity to ease countrywide blackouts.
“The spot market is beneficial to them because they make marketing margins,” said Ballabh Modani, an oil and gas analyst with Mumbai-based Batlivala & Karani Securities.
The government bars Petronet from charging sales commission on LNG imported under multi-year contracts, in addition to a fixed fee to turn liquid cargoes into gas at its terminal, Modani said. Petronet gets about 2% commission on domestic sales.
Petronet, which has exhausted capacity at its 5mt-a-year terminal at Dahej, will lease 40% of Royal Dutch Shell Plc.’s 2.5mt-a-year terminal in Hazira. Petronet and Shell may import as much as 8mt in 2007, Dasgupta said. That’s equal to 5% of global LNG demand last year, say consultants Wood Mackenzie.
About 5,000MW of gas-fired electricity generating capacity worth $4.4 billion (Rs19,360 crore) is unused in India because of lack of affordable natural gas, former power secretary R.V. Shahi said on 13 October 2006. India’s economy would be a tenth larger, but for power shortages, according to finance ministry estimates. The shortfall forces factories to instal back-up generators, raising production costs.
The country’s gas-fired power plants are getting 30 million cubic metres of gas a day, compared with the 48 million cu.m that would be consumed should capacity be fully utilized, Shahi had said.
“We are leasing capacity at Shell’s LNG terminal in Hazira to import some cargoes,” Dasgupta said. Petronet will import 13 individual cargoes in the year ending March 2007, he said.
Dasgupta is tapping supplies from Algeria and Egypt, from where it takes an LNG tanker twice as long to reach India, compared with supplies from Qatar, because of shortage of cargoes in West Asia, he said.
Shares of Petronet closed at Rs48.15 on Wednesday, down 0.1% this year, compared with a 1.6% rise in the country’s benchmark Sensex. The company may make an additional Rs250 crore in operating profits next year after selling the extra spot cargoes to its customers, Modani said. Petronet made a profit of Rs850 crore in the three months ended 31 December 2006. Sales rose 53% to Rs1,580 crore in the quarter.
Locally produced gas supplies of 11 million standard cubic meters a day are not enough to meet the 17 million standard cubic meters required by NTPC Ltd., India’s biggest power producer, Chairman T. Sankaralingam said on Feb. 7.
The power plant in Dabhol, begun by Enron Corp. in 1996, is key to ending power shortages in Maharashtra state, home to India’s financial capital Mumbai. The plant has never worked at more than one-third of capacity because of Enron’s collapse, disputes over power prices and a lack of gas for the furnaces.
Today, the plant operates at 15 percent, burning the costlier oil product naphtha. It will start receiving gas through a new pipeline later this year.
Maharashtra’s Shortage
Maharashtra faces a shortage of 4,500 megawatts of power, Jayant Kawle, Maharashtra’s principal energy secretary, told reporters on Feb. 5. Areas outside Mumbai face 12-hour-a-day power cuts, according to Maharashtra State Electricity Distribution Co.
Petronet, which is spending Rs1,600 crore to double Dahej’s capacity by December 2008, is controlled by Bharat Petroleum Corp., Oil & Natural Gas Corp., GAIL India Ltd and Indian Oil Corp. The companies together hold 50%. A new terminal in Kochi will be completed by 2010 at a cost of Rs2,050 crore, according to Petronet’s annual report for the year ended March 2006.
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First Published: Thu, Feb 15 2007. 10 24 PM IST
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